Endowments at area colleges range from millions to over $1 billion, and most are growing.

Given that colleges are exempted from property taxes on their sprawling campuses, tuition can exceed $50,000 a year and there is nearly $1.5 trillion in student debt nationwide, endowments can be an easy target for college critics. But endowments aren't simply a pot of money, the colleges say. And interest from investments are vital to the health of the institution.

Some colleges use interest from funds to pay for operating costs to tamp down on tuition. Some money may be earmarked for a particular subject or field. Endowments also contribute to student financial aid. Keeping all of this going means investing.

College endowments in the Hudson Valley — they range from $11 million at Dutchess Community College to Vassar College's $1 billion — support an array of programs that are typically earmarked by donors.

And at Vassar College, revenue from the endowment also provides about 30 percent of the school's annual operating budget of $184 million, the second largest component after tuition and fees. For context, annual tuition at Vassar was $55,210 for the 2017-18 school year.

Most local endowments growing

According to the National Center for Education Statistics, which is part of the U.S. Education Department, Vassar’s endowment for the 2016 fiscal year was $929 million, which ranked 94th of the 120 degree-granting, post-secondary institutions with the largest endowments.

Harvard University was number one with an endowment of $36 billion. Denison University in Ohio ranked 120th with an endowment of $724 million.

Vassar’s endowment is now roughly $1.05 billion, according to the college. In 2008, it was $869 million, prior to the recession.

Bard College’s endowment in 2008 was $232 million, $8 million more than it is now. A spokesman for the college said the recession was partly to blame.

For the other colleges, since 2008:

Marist’s endowment has grown by $49.5 million to $71 million.

The SUNY New Paltz Foundation’s endowment has grown by about $13 million to roughly $23 million.

The Dutchess Community College Foundation endowment has grown by $7 million to $11 million.

Neither Vassar, the DCC Foundation or SUNY New Paltz Foundation spend endowment principal, according to officials.

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Students walk to class at Dutchess Community College in the Town of Poughkeepsie on December 6, 2018. (Photo: Patrick Oehler/Poughkeepsie Journal)

Bard, rather than just spending revenue generated by interest from investments, has occasionally borrowed from its endowment principal to pay for programming.

Conversations among donors and board members about what the money is being used for precede any allocations, said Taun Toay, Bard’s vice president for enrollment and strategy initiatives.

“We don’t want to function like an individual bank that happens to have an education arm in a college,” he said.

Bard earns an average of 8 percent in interest annually on the total endowment and spends 5 percent of the endowment per year.

Marist takes the average market value of the entire endowment for each quarter of the preceding three years, multiplies that by five percent and that’s what is available to spend annually .

For the other schools, according to the colleges:

Vassar earns about 8 percent annually and typically spends about 5 percent of the total endowment each year.

The SUNY New Paltz Foundation takes an average of the preceding five years of investment returns and spends 4 percent of that amount.

The DCC Foundation’s $11 million endowment is made up of an $8.5 million principal and $2.5 million from earnings. The amount that is spent annually is equal to 5 percent of the principal, but is spent from the earnings. The $11 million is earning 6.5 percent interest.

And those earnings, regardless of the college, continue to become more important.

“Being a state school with ever-decreasing state support for public higher education, coupled with the fact that the college itself has no direct control over setting tuition — these are our only two sources of operating income — only increases the amount of pressure to augment the amount of philanthropic dollars raised,” said Erica Marks, vice president for development and alumni relations and executive director of the SUNY New Paltz Foundation.

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Students walk to class at Marist College in the Town of Poughkeepsie on December 6, 2018. (Photo: Patrick Oehler/Poughkeepsie Journal)

So what would happen if that endowment didn't exist?

At Vassar, officials would have to come up with the money somewhere else or find a way to reduce costs, said Stephen Dahnert, the college’s vice president for finance.

“This would result in some combination of higher costs for students and families, reduced programming and larger class sizes,” he said.

As for the Town of Poughkeepsie, Supervisor Jon Jay Baisley said he'd be grateful to receive a check from Vassar, especially since the school's endowment is so big. But he realizes that the college is critical to the community in other ways that include providing jobs.

"It keeps your quality of life up because those are the people shopping in your stores, using all your services around town," Baisley said of Vassar employees. "The dollar goes a long way. it gets spent over and over."

Financing financial aid

Spending Marist College's $71 million endowment would not allow the school to offer a tuition-free education to its 5,000 undergraduate students.

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Students walk to class at Marist College in the Town of Poughkeepsie on December 6, 2018. (Photo: Patrick Oehler/Poughkeepsie Journal)

At Marist, 77 percent of students receive some type of financial aid. During the 2018 fiscal year, the school awarded $1.2 million of its $1.8 million endowment spending as financial aid to students.

And with roughly 60 percent of Vassar students receiving some financial aid, about 30 percent of the endowment supports scholarships.

A college endowment is a collection of funds, sometimes hundreds or thousands of individual funds, totaling anywhere from $10,000 to more than a million dollars, according to the National Association of College and University Business Officers.

And though local colleges have embarked on multi-million dollar capital projects in recent years, like Marist's Fulton Technology Crossroad Project, endowments don't typically fund construction projects.

Donors usually earmark funding for items that can range from a lecture series to a faculty chair. And that's why a school can't simply dip into its endowment to reduce tuition or allocate funding to a town, officials said.

College endowments are subject to the fluctuations of the stock market. And the principal is often left alone while revenue from investments is spent.

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Students and staff inside the College Center at Vassar College on October 12, 2018.(Photo: Patrick Oehler/Poughkeepsie Journal)

What do endowments fund?

At Dutchess Community College, the DCC Foundation endowment helps cover the cost of daycare for the children of students who are parents.

The DCC Foundation, which manages the endowment and other philanthropic contributions, annually provides more than $450,000 in scholarships at the Town of Poughkeepsie school. At DCC, 42 percent of students are eligible for state or federal financial aid.

Roughly 61 percent of the spendable income from the endowment supports scholarships, internships and study abroad and experiential learning programs, according to the college. Annually, 300-350 students receive a total of $750,000 to $1 million in financial support from the endowment and financial gifts to the SUNY New Paltz Foundation.

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Students walk to class at SUNY New Paltz on October 10, 2018.(Photo: Patrick Oehler/Poughkeepsie Journal)

As with DCC, the SUNY New Paltz Foundation manages the endowment and other philanthropic funding.

Marist's endowment supports the college's Hudson River Valley Institute. And this funding paid junior Spencer Hogan's salary during his summer 2018 internship with the academic arm of the federal Hudson River Valley National Heritage Area.

Hogan said he learned just how important that experience was during recent interviews he had for internships in the business and finance industries.

“I was struck by the fact that during these interviews at major insurance companies and investment banks, one of the first questions asked wasn’t, ‘Tell me about your finance classes or relevant work experience,'" Hogan said. “The first question in two of these interviews was, ‘What’s the Hudson River Valley Institute and tell me about your research.’"

All of this is critical for Hogan because he sees an internship as a path to a job.

Endowments key to higher education

Lynn Pasquerella, president of the Association of American Colleges and Universities, said endowments are pivotal components in the finances of higher education.

“They’re really critical, especially at a time when there’s been a change in the narrative around the value of higher education in general and liberal arts education in particular,” said Pasquerella said. “It used to be, we talked about higher education as a public good. Now, it’s seen more as a private commodity.”

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Students walk to class at Dutchess Community College in the Town of Poughkeepsie on December 6, 2018. (Photo: Patrick Oehler/Poughkeepsie Journal)

Pasquerella pointed to a recent survey on higher education from the Pew Research Center as an indication of this. One survey said about six-in-ten Americans, or 61 percent, say the higher education system in the United States is going in the wrong direction.

Reasons for the dissatisfaction include:

High tuition costs

Students not receiving skills they need for the workplace

Colleges and universities are too concerned about protecting students from views they might find offensive

Professors bringing political and social views into the classroom.

Pasquerella said the changing narrative has resulted in public funding cuts for higher education and a drop in donations. She said things need to change and a school’s endowment should be part of that conversation.

“We have an unsustainable financial model in higher education,” she said. “We can’t keep increasing tuition and having a burgeoning loan burden at a time when job prospects for college graduates remain uncertain... It’s a delicate balance... We don’t want to keep raising tuition, but we also don’t want to draw down the endowment.”

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Students inside the Bridge for Laboratory Sciences at Vassar College on October 12, 2018.(Photo: Patrick Oehler/Poughkeepsie Journal)